The full story...

Hardie directors' bans reduced

MARK COLVIN: The timing is extraordinary; the result looks likely to anger many. As ABC television airs the miniseries 'Devil's Dust', about the James Hardie asbestos scandal, the NSW Court of Appeal has reduced the bans imposed on Hardie's directors.

The case concerned the directors' approval of a false statement which claimed that a foundation that James Hardie set up to compensate victims of its deadly asbestos was fully funded - it was, in fact, insolvent.

In response, the NSW Supreme Court banned former chairman Meredith Hellicar and five other independent directors from running companies or serving on company boards for five years. That's now been slashed to between two years and two years and three months.

I asked Stephen Long first why had the appeal court judges reduced the bans.

STEPHEN LONG: Mark, the appeal court judges have accepted that the initial five-year ban was appropriate, but they've applied mitigating circumstances, including the public opprobrium that the directors have suffered, their exemplary records prior to the contraventions at James Hardie, their contributions to the community, and their qualified contrition.

Now, the statements by the appeal court judges are somewhat in contrast to the initial judge's finding, particularly in relation to the former chairwoman, Meredith Hellicar. The initial judge said that he had grave doubts about her evidence, that she was an unsatisfactory witness, that she'd feigned shock when being confronted by material of which she knew. It's a very different tenor in this decision.

MARK COLVIN: So, it was originally the Supreme Court and it's now gone to the NSW Court of Appeal - is that the end of it?

STEPHEN LONG: It's actually been quite a circuitous route because it went to the Supreme Court. It then went on appeal to the Court of Appeal, who quashed the initial finding against the directors. It then went to the High Court, which upheld the initial finding -

MARK COLVIN: The High Court of Australia?

STEPHEN LONG: The High Court of Australia, which upheld the initial Supreme Court judge's finding and has remitted it to this bench, this appeal bench to determine penalties. And although the initial decision of the Court of Appeal was quashed, they've decided to reduce the penalties.

MARK COLVIN: And just remind us of the long and sorry history of this whole affair.

STEPHEN LONG: The issue in question dates back more than a decade. Well in fact James Hardie's manufacture of asbestos goes back many, many decades, but this issue dates back to the early 2000s, when James Hardie was planning a restructure.

It wanted to list on the stock exchange in America. It moved its actual corporate headquarters to the Netherlands, and it wanted to shed itself of what it called 'the legacy assets' of asbestos, which had a very bad name in the United States because of liability. It set up a foundation out of the shell of its former asbestos-producing companies.

Now at the time, it issued a press release to the stock exchange, saying that the foundation was fully funded and would be able to meet all future liability claims. That was completely wrong, and the issue here was that the directors were found to have been negligent and didn't fulfil their duties by allowing that media release to be issued.

MARK COLVIN: Now, this has dragged on a long time as you say. These directors, including Meredith Hellicar, how much more time of their ban have they got left to serve?

STEPHEN LONG: Not much. Meredith Hellicar and most of the directors will be able to run companies from May next year and serve as directors once again - one particular director, Peter Wilcox, from sometime in March.

Now, effectively, their ban is a little bit more than three years, but the court has taken into account a period where they weren't banned because of the successful appeal, but nonetheless did not run companies. So although it has imposed a two-year, two-year-and-three-month ban, it's effectively a bit longer.

But they'll be free to run companies again before the middle of next year and to serve as directors, take up their careers again should they be able to find positions on company boards.

But I must say, Mark, that this doesn't really clear them. One of the observations of this appeal bench is that the material available to the directors of James Hardie at the crucial meeting where they issued this false and misleading press release which allowed for the whole situation of the unfunded foundation, the material should have made it abundantly clear that that announcement was wrong and misleading.

And some of that material was the subject of detailed presentation at that very meeting, and in these circumstances, it's a small step to conclude that the Australian directors knew that the representations conveyed to the stock exchange, the securities exchange, were actually false.